This Statement of Administration Policy provides the Administration's views on the Foreign Operations, Export Financing, and Related Programs Appropriations Bill, FY 2000, as reported by the House Appropriations Committee. Your consideration of the Administration's views would be appreciated.

The allocation of discretionary resources available to the House under the Congressional Budget Resolution is insufficient to make the necessary investments that our citizens need and expect. The President's FY 2000 Budget proposes levels of discretionary spending that meet such needs while conforming to the Bipartisan Budget Agreement by making savings proposals in mandatory and other programs available to help finance this spending. Congress has approved and the President has signed into law nearly $29 billion of such offsets in appropriations legislation since 1995. The Administration urges the Congress to consider such proposals as the FY 2000 appropriations process moves forward.

As a result of the inadequate 302(b) allocation for Foreign Operations, the bill reported by the Committee on July 20th is $1.9 billion, or 14 percent, below the program level requested by the President. Funding at this level would seriously impair the President's ability to conduct an effective foreign policy.

The Administration appreciates the efforts of the Committee to accommodate certain of the President's priorities within its 302(b) allocation, as well as the Committee's strong support for limiting the number of provisions in language that restrict and earmark the use of funds. Nonetheless, the allocation available for Foreign Operations for FY 2000 is substantially below the level requested by the President. The funding level provided by the Committee, therefore, would prevent the President from confronting or dealing effectively with new challenges and is inadequate to maintain America's leadership around the world. It would inevitably require reductions from previously enacted levels for programs managed by the Departments of State and the Treasury, the Agency for International Development, and others.

If the Congress were to enact a bill that does not resolve the significant funding shortfalls in the Committee-reported bill, the President's senior advisers recommend that he veto the bill.

The rule approved by the House on July 27th makes in order three amendments related to international family planning programs:

The Administration strongly opposes the Smith amendment which would prohibit the U.S. Government from providing funds to foreign non-governmental organizations if these organizations use any of their own funding from non-U.S. Government sources for abortion-related services or advocacy. The Administration continues to oppose these restrictions, which would deny funding to the most experienced and qualified family planning and maternal and child health care providers. In prior years, the Administration has made clear that the President would veto the bill if it contained the "Mexico City" language. The President took such action in 1998 when he vetoed the State Department authorization bill. Should the Smith Amendment be included in the final bill presented to the President, the President would veto the bill.

The Administration strongly supports the Greenwood amendment. This amendment bars population planning activities that are illegal in the recipient's country, but allows the organization's own funds to be used for legal activities. It provides that advocacy activities in opposition to coercive abortion or involuntary sterilization would not be grounds for disqualification of U.S. funds. The amendment also makes clear that organizations receiving U.S. funds for family planning services must certify that they will use those funds to reduce the incidence of abortion and reiterates the ban on the use of U.S. funds to perform or lobby for abortions.

The Administration also strongly opposes the Pitts amendment, which would prohibit the use of Child Survival account funds for child spacing assistance. Child spacing plays a critical and integral role in Child Survival-funded programs aimed at saving the lives of children and their mothers, and this amendment therefore would undermine these critical maternal and child health programs.

Detailed comments on the Committee-reported bill are provided in the attachment.

Multilateral Development Banks (MDBs). The Administration's request, excluding arrears payments, is 40 percent below the scheduled payments sought for the MDBs in the mid-1990s. The Committee's decision to reduce funding for the MDBs by $493 million amounts to a 35-percent reduction to the President's request. This severe cut, and the lack of any funding for arrearage payments, would erode much of the progress made in the FY 1998 and FY 1999 appropriations bills in meeting the past-due and continued obligations of the United States to these institutions, and in strengthening our ability to get approval of important institutional reforms. In particular, the Administration is disappointed with the Committee's decision to cut a further $200 million from the International Development Association (IDA). All of IDA resources go to countries whose people earn less than $3 per day - 50 percent of IDA commitments are directed towards the poorest countries in Sub-Saharan Africa. This reduction would undercut congressional efforts to address the humanitarian and development needs of the continent, and, in particular, undercut the intent of the recently-passed African Growth and Opportunity Act.

The lack of any funding for the African Development Bank, the Inter-American Investment Corporation, the Multilateral Investment Fund, the Multilateral Investment Guarantee Agency, and the Community Adjustment and Investment Program (part of the North American Development Bank) -- combined with the drastic cuts in the Global Environment Facility and the Asian Development Fund -- would call into serious question the willingness of other donors to continue their support for these critical institutions at the very point when their support for environmental and economic development is most needed.

Independent States of the Former Soviet Union. The Administration continues to place a high priority on our relations with this region and appreciates the Committee's ongoing efforts to reduce earmarks and restrictions on our assistance to this region. Reducing such restrictions enables the Administration to target assistance to maximize its effectiveness, especially in working with pro-reform governments and non-governmental democratic forces and the private sector. The Administration praises the Committee for its removal of restrictions on aid to local governments in Russia, although we are concerned by the removal of Presidential waiver authority for these restrictions.

The overall funding provided by the Committee, $725 million, is not only below the requested $1,032 million but is also $122 million below the FY 1999 level. The Administration believes that the economic problems in Russia and the rest of the Independent States, which have created hardships for millions of people and heightened the risk of proliferation of weapons of mass destruction and related expertise, call for increased rather than decreased efforts. A reduction of the magnitude contained in the Committee mark would place threat reduction programs that are in our immediate national security interests in competition with programs that will help secure our long-term interests in the region, such as support for small businesses in the regional initiatives, exchange programs designed to develop a new generation of pro-reform leaders, and institutional partnerships. The Administration understands that an amendment may be offered that would prohibit any support for these critical threat reduction programs. The Administration opposes any such amendment.

Kosovo and the Balkans. The Administration appreciates the Committee's provision of the full request for Assistance to Eastern Europe and the Baltic States. Nonetheless, as the crisis in Kosovo has demonstrated, there is clearly a need for additional funds to support Kosovo operations and, indeed, enhancements to various programs throughout the Balkan region. We are now working with the Departments of Defense and State and other agencies to determine current estimates for peacekeeping and for peace implementation, including additional humanitarian needs, such as refugee programs, beyond the original request. The President will submit an additional FY 2000 funding request to the Congress.

Korean Peninsula Energy Development Organization (KEDO). The Administration strongly objects to the bill's provisions limiting the amount of the U.S. contribution to KEDO. The cut of $20 million, or 36 percent, in funding could prevent the United States from fulfilling its commitments under the Agreed Framework to provide heavy fuel oil to North Korea and could damage our nonproliferation policy on the Korean Peninsula. In addition, the bill introduces new Presidential certifications that go well beyond what has been required in the past and could make it extremely difficult to carry out our commitments. Finally, the prohibition on the President's ability to exercise his special authorities to provide additional funding for KEDO, should he deem it to be in the national interest, is unwise.

Wye River and Middle Eastern Assistance. The Administration welcomes the Committee's provision of the entire FY 2000 request for additional assistance for Jordan. The bill does not, however, provide $400 million of the funds requested by the President for FY 2000 to support the Wye River Agreement, nor does it provide $800 million of the funds requested as an FY 1999 supplemental appropriation for this purpose. Given the renewed dedication of all sides to the peace process, the Administration hopes to work with Congress to provide this funding to support and strengthen the peace process and to move toward a permanent agreement.

The Administration continues to welcome the Committee's efforts to ramp down traditional levels of assistance to countries in the Middle East. However, the Administration is disappointed at the Committee's failure to accept our specific proposal for a gradual reduction in aid to Israel and Egypt and with its decision not to incorporate the provision of an Interest Bearing Account for a portion of Egypt's Foreign Military Financing (FMF). The Administration will work with the Congress on the scoring implications of this proposal.

Economic Support Fund (ESF). The reduction of over $140 million to the President's request for non-Wye River ESF would effectively remove any ability that the President has to respond to a host of threats and new crises around the world. These cuts would force the reduction of programs intended to increase political stability and democratization in Africa; support democracy efforts in Guatemala, Peru, and Ecuador; and, bolster democratic reform and economic recovery in Asia.

Debt Reduction. The cut of almost three-fourths to the President's request for debt reduction programs, from $120 million to $33 million, would cripple our ability to fund the bipartisan debt for environment program that was enacted by the Congress last year and would damage our ability to contribute to the Trust Fund for the Highly Indebted Poor Countries, which is an essential component of current debt reduction programs as well as of the historic debt initiative agreed to in Cologne. This initiative has received broad support from governments, multilateral institutions, religious groups, and individuals worldwide.

Peacekeeping Operations. The Committee's $53.5 million, or 41 percent, cut to the President's request for voluntary peacekeeping operations would decrease funds available for Organization for Security and Cooperation in Europe (OSCE) missions in Bosnia, Croatia, and Kosovo; reduce assistance for the African Crisis Response Initiative; and, diminish our ability to respond to unforeseen conflict and crises.

Nonproliferation, Anti-terrorism, Demining, and Related Programs. The Committee has cut these programs by $49 million, or 21 percent, from the President's request. In addition to the reduction for KEDO discussed separately, the request for export control assistance would be cut by two-thirds (from $15 million to $5 million). This would greatly slow our efforts to assist the NIS and other regions to develop tighter controls to prevent nuclear smuggling.

United Nations Population Fund. The Administration is strongly committed to population and reproductive health programs and to the United Nations Population Fund (UNFPA). The Administration appreciates the Committee's recognition that it would be counterproductive to prohibit funding for UNFPA, which provides voluntary family planning and other services to over 160 countries, because of its operations in China. We are concerned, however, that the mark for International Organizations and Programs would not be sufficient to allow for an adequate contribution for UNFPA programs that save lives and promote healthy families.

U.S. Agency for International Development (USAID). The Administration is concerned about the Committee's drastic cut in Development Assistance. A $111 million reduction below the request, or $12 million below the FY 1999 enacted level, would threaten USAID's ability to implement such programs as the Africa Education Initiative and the Food Security Initiative, and would limit the Agency's ability to address the financial crisis in Asia, as well as to address follow-up needs from the recent natural disasters in Central America. The bill also fails to include language that would permit assistance to customs officials and offices. The Administration requested this language to encourage the free flow of commerce within regions in sub-Saharan Africa and Latin America, thereby supporting private sector development in those regions.

The Administration greatly appreciates the Committee's full funding of the Child Survival and Disease Programs request. However, within this amount, the Administration is concerned that full funding of $10 million has not been provided for the Administrations's "School Works" initiative. This initiative addresses the critical issue of child labor in developing countries, a concern the Congress shares, and we urge the Committee to fully fund this program. We also note that the recently-transmitted, fully offset budget amendment to provide an additional $100 million for the fight against global AIDS included an additional $45 million for this account. We urge the Committee to provide these critically-needed additional resources.

The Administration is deeply concerned that the $480 million funding level for USAID's operating expenses is inadequate to meet the operational demands on USAID. The Committee acknowledges the transfer of the security function from the Inspector General's (IG's) office and has reduced funding for the IG accordingly but provides no increase to cover this additional $7.7 million cost in this account. Even if increased to cover these security requirements, the Committee's recommended operating expense level would require a reduced workforce level inconsistent with USAID's responsibility for proper oversight of the program levels that the Committee has provided. The Committee's funding level would also make it impossible for USAID to complete needed replacement of its financial management systems or to begin the significant security improvements, including temporary and permanent relocations of USAID missions, that are required to respond to the increased threats that U.S. personnel face around the world.

The bill does not contain the Administration's request for Voluntary Separation Incentives for employees of USAID (buyout authority). This buyout authority is vital to allow USAID to continue to reduce its employment levels in Washington. The Administration is also concerned that the Committee has not approved the requested authority for USAID to create a Working Capital Fund similar to those already available to the Department of State and other agencies. It is important that USAID be provided the means to capture the costs of becoming a service provider to other agencies under the ICASS system, and therefore encourage competition among agencies to provide the lowest-cost and most efficient services.

The Administration is concerned that its request for reinstatement of the Development Fund for Africa (DFA) is not included in the bill. Funding provided under the DFA affords needed stability to respond to development opportunities in Africa, as well as to complex crises on a fragile continent, and maintains our strong commitment to an Africa in transition. There are insufficient resources within the Development Assistance account to address such needs.

The Administration is disappointed that the Committee has not approved transfer authority for the Development Credit Authority. USAID's recent implementation of a credit management outsourcing contract and other credit management improvements justifies continued funding of this innovative and improved credit mechanism. We are also disappointed that the Committee has not provided subsidy budget authority for the Urban Environment Credit program.

Peace Corps. The Administration appreciates the Committee's efforts to support the Peace Corps within tight budget constraints. However, the Administration is very concerned that the Committee's funding level of $240 million falls short of the amount necessary for the Peace Corps to continue to promote grass-roots development and strengthen the ties of cross-cultural understanding between Americans and the people of over 70 countries. This $30 million, or 11 percent, reduction to the President's request for the Peace Corps would force the agency to reduce the number of volunteers currently serving overseas and to consider closing additional country programs. It would also prevent implementation of the bipartisan initiative to field 10,000 volunteers in the new century. Earlier this year, both the House and Senate passed an authorization bill with bipartisan support that would enable the Peace Corps to send 10,000 volunteers overseas.

Export and Investment Financing. The Administration appreciates the Committee's effort to fund the requested increase in the Export-Import Bank's administrative budget. However, we note the Committee's reduction in the Export-Import Bank's subsidy budget -- $80 million below the request and $6 million below the FY 1999 enacted level. The requested increase is an important part of the President's manufactured exports initiative. The Committee's reduction would reduce the financing available to United States exporters that are attempting to continue to export during the ongoing economic downturn in Asia and much of the rest of the developing world. Because exports have been such a critical component of job creation in the United States, this cut could have a negative impact on job growth.

The Administration is also very concerned about the reduction to the President's request for the Trade and Development Agency (TDA). As with the Export-Import Bank, the requested increase for TDA is an integral part of the President's export initiative, and the Committee bill would significantly reduce TDA's ability to fund feasibility studies that help U.S. exporters take advantage of potential market opportunities.

The Administration appreciates the Committee's full funding of the administrative budget for the Overseas Private Investment Corporation (OPIC). We are concerned, however, by the Committee's reduction of $3.5 million to the request for OPIC's subsidy. The Administration had already reduced the request by over 50 percent from the FY 1999 enacted level, and a further cut would make it difficult for OPIC to meet the needs of investors, including small businesses, who rely on OPIC financing in important markets such as Africa, the Caribbean, and Central America. Likewise, we are concerned about language that would allow OPIC to use appropriated funds to engage in direct equity investments. While OPIC has had the authority to make such direct equity investments for a number of years, the Congress has never provided funding for this authority. The Administration believes that this proposal has important budgetary and policy consequences that have not been fully reviewed. For that reason, the Administration cannot support the language allowing OPIC such authority until it has had a chance to consider this proposal thoroughly in further consultation with Congress.

The Administration would strongly oppose possible amendments that would preclude OPIC from offering new loan guarantees. Such guarantees are important to the promotion of US business opportunities in developing markets around the world. Precluding these guarantees would harm the mutually beneficial relationship between American business and the developing foreign private sectors in Africa, the Caribbean, Central America and elsewhere.

Migration and Refugee Assistance (MRA). The Committee's $20 million reduction to the President's request for MRA could require a reduction in annual refugee admissions and would not provide adequate resources for an initiative to address programming shortfalls in Africa necessary to provide life-saving, minimum international standards of assistance in key sectors (including nutrition, shelter, medicine, sanitation, and protection). Such reductions in assistance to refugees in Africa and elsewhere at the very time huge resources are going into Kosovo could create serious political and equity issues.

Inter-American Foundation. The Administration strongly opposes the cut of over $17 million to the request for the Inter-American Foundation. This reduction, which would cut funding by 75 percent of the FY 1999 enacted level, would completely debilitate the Foundation, making it impossible to continue its important work of supporting innovative development initiatives and U.S. corporate social investments in Latin America and the Caribbean. The Administration recognizes the need for changes to enhance the Foundation's internal oversight procedures and project monitoring, but significant progress has been made to date, and the Administration is committed to ensuring further improvements are made.

African Development Foundation (ADF). The Administration commends the Committee for fully funding the request for ADF, and for recognizing the significant management and programmatic improvements that this small but important agency has implemented during the past year.

Treasury International Affairs Technical Assistance. The Administration is concerned that the Committee has provided only $1.5 million of the $8.5 million requested for the Department of Treasury's International Affairs Technical Assistance program. These resources are necessary to fund the Department's plan to provide technical assistance to Ministries of Finance and Central Banks that are attempting to implement fiscal and financial reforms in Africa, Asia, and Latin America.

Kyoto Protocol Restriction. The Committee has included language in the General Provisions that would prohibit the Administration from proposing or issuing rules to implement the Kyoto Protocol. This is an unnecessary restriction because the Administration has stated that it does not intend to implement the Protocol on global climate change until it has been ratified by the Senate.

Additional General Provisions Language Concerns. Section 514(a) (Surplus Commodities) and section 566(b) (Sanctuary to Indicted War Criminals -- Multilateral Assistance) purport to direct the Executive to take particular positions in international organizations. When construed as mandates, these provisions would encroach on the President's sole constitutional authority to control negotiations. If unchanged, this language would be construed as precatory.

Amendment on the Baku-Ceyhan pipeline. The Administration understands that an amendment may be offered that would prohibit any U.S. Government support for financing the Baku, Azerbaijan-Ceyhan, Turkey pipeline in the Caspian Basin unless a final peace agreement was reached between Armenia and Azerbaijan on the Nagorno Karabakh region. The Administration would strongly oppose such an amendment, which would undercut U.S. energy policy, cripple U.S. efforts to provide Caspian countries with a credible economic development path linked to the west, encourage regional exporters to build export pipelines through Iran, and disadvantage U.S. businesses competing for millions of dollars in exports. It would hinder, rather than help, U.S. efforts to achieve a just peace in the region and improve Turkish-Armenian relations.